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The one thing that’s certain about the coronavirus pandemic is that nothing is certain. We don’t know if or when we’ll be dealing with the next wave. We don’t know when there will be a vaccine. We don’t know when it’ll be under control. We don’t know when jobs will come back. An astounding 40+ million Americans had filed for unemployment benefits by the end of May due to coronavirus closures. Although there are exceptions, workers in most states are eligible for 26 weeks of unemployment benefit payments and an extra 13 weeks added due to the coronavirus. With the country slowly reopening, and many choosing to remain at home fearing the next wave of infections, there will likely be millions of people still out of work when the $600 a week “boost” to unemployment benefits ends on July 31.
Here are some ways to adjust your budget when unemployment benefit payments stop:
1. Examine Your Finances
Before you get control of your financial situation by setting up (and sticking to) a budget, you need a clear picture of what you have coming in and what you have going out. Add up your expenses, meaning all your monthly bills and money spent on food and all other necessities, and then subtract that from your unemployment benefit totals.
If your expenses are higher than your current income, look for ways to cut expenses.
Some ways you can cut back are:
- Call your creditors to see if they offer deferments on payments. Be sure to read the fine print so you understand any long-term repercussions.
- Cut food costs by clipping coupons, buying store brands, and buying less.
- Cut back on cable and streaming services. It may be tough because we’re all spending more time at home, but consider cutting down to one streaming service at most.
- Cut monthly subscriptions such as magazines, gym memberships, streaming music services, video game subscriptions, or any other monthly service that’s leeching your money.
2. Earn Extra Money
You can earn money while collecting unemployment benefit payments; however, the rules vary from state to state so it’s important to research your state’s requirements. You wouldn’t want to jeopardize your benefits for part-time work that brings in less money. In addition, it’s important that you accurately report any money earned when you do your weekly unemployment filing. Many states will subtract a portion of your earnings.
3. Put Financial Decisions on Hold
If you were saving for a big purchase such as a home or a vehicle, consider putting it on hold for now. The same goes for a big move such as a new apartment (unless it’s cheaper) or a new job. A new job may be a good move if it’s secure or you won’t be going back to your old job. However, if you were merely furloughed, and you expect to get your old job back, you may want to wait. With so much uncertainty, now may be the time to be safe.
4. Use Your Emergency Fund
If you have an emergency fund set up (you should), now’s an emergency. You should use it sparingly of course, but it’s there to keep you from turning to credit to pay your bills. Instead, use your emergency fund and refund the account when you’re working again.
5. Use Your Retirement Savings
Yes, you read that correctly. Normally, using any of your retirement savings isn’t a good idea; even now, it should only be done as a last resort. However, the CARES Act has created some provisions to allow lesser penalties when withdrawing from your 401(k).
Remember, the extra $600 a week in your unemployment benefit payments is slated to go away on July 31, and currently, there’s no indication that the government will offer an extension. Save as much of it as possible to help tide you over when that added benefit is gone.